VIX At 2-Month High: Fears Mount As Markets Re-Assess Rate Cut Premium
Portfolio Pulse from Neil Dennis
The CBOE VIX volatility index, known as Wall Street's 'fear gauge,' reached a two-month high of 14.5, indicating increased market volatility and investor concern. The ProShares VIX Mid-Term Futures ETF (VIXM) rose 2.4% in response. The S&P 500 and SPDR S&P 500 ETF Trust (SPY) previously gained 16% as the VIX fell from 21 to around 12. Market expectations of Federal Reserve rate cuts are being reassessed due to recent economic data and Fed member comments, suggesting a more cautious approach to rate cuts. Geopolitical tensions, particularly in the Middle East, are also contributing to market uncertainty, although they have not significantly impacted oil prices or traditional safe-haven assets like gold and Treasuries, with the SPDR Gold Shares ETF (GLD) remaining flat.
January 17, 2024 | 2:33 pm
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NEGATIVE IMPACT
The SPDR S&P 500 ETF Trust (SPY) may face short-term pressure as the VIX, which inversely correlates with equity markets, has risen, indicating potential volatility and downside for equities.
The SPY ETF tracks the S&P 500, which historically moves inversely to the VIX. As the VIX increases, indicating higher market fear, the SPY may experience short-term declines due to anticipated market volatility and investor risk aversion.
CONFIDENCE 80
IMPORTANCE 75
RELEVANCE 80
NEUTRAL IMPACT
The SPDR Gold Shares ETF (GLD) remained flat despite increased market volatility and geopolitical tensions, suggesting a neutral short-term impact.
Gold and the GLD ETF are traditionally seen as safe-haven assets during market turmoil. However, the article indicates that gold prices and GLD have not reacted significantly to the current market volatility or geopolitical risks, suggesting a neutral short-term impact on GLD.
CONFIDENCE 75
IMPORTANCE 60
RELEVANCE 70
POSITIVE IMPACT
The ProShares VIX Mid-Term Futures ETF (VIXM) rose 2.4% as the VIX reached a two-month high, reflecting increased market volatility.
The VIXM ETF directly mirrors the performance of the VIX volatility index, so an increase in the VIX typically leads to a corresponding increase in VIXM's value. The recent spike in the VIX suggests that VIXM may continue to experience short-term gains as investors seek to hedge against volatility.
CONFIDENCE 85
IMPORTANCE 80
RELEVANCE 90